The Jones Act is one of the most important sources of protection afforded to seafarers in the United States. Enacted in 1920, the law serves a variety of purposes, including allowing seafarers the ability recover compensation based on claims of negligence on the ship’s master or crew’s part. It also regulates maritime commerce in U.S. waters and between U.S. ports. But while the law has helped countless seamen injured in the course of their employment to obtain justice, not everyone is a fan.
Recent tensions between oil tycoons and Capitol Hill over the law might spell trouble for maritime workers. Seafarers might soon have to seek legal representation with an experienced Jones Act attorney as petroleum marketers and refiners continue to push for changes to the law.
The oil industry moguls claim the Jones Act is causing motor fuel and heating oil prices to skyrocket, hindering the flow of crude between U.S. ports. They aim to get Congress to agree to make changes with the law in order to reduce the Jones Act’s strict regulations. Though tensions are boiling, industry leaders have yet to reveal a solid plan of action as to what exactly they are asking Congress to change regarding the law, but many speculate they will try to push for a round of new Jones Act wavers to allow for the transportation of crude oil from the Gulf of Mexico to east coast refineries.
However, actually getting Congress to approve a waiver is not that easy. Waivers are reviewed on a case by case basis and have, in the past, only been granted in cases of national emergencies, such as in the wake of Hurricane Katrina, when Congress waved the coast-wise laws for foreign ships transporting oil and natural gas for the first two and a half weeks in September, 2005, or in cases of strategic interest.
In the more than likely event the waivers will not be issued, oil and gas companies might try to suggest that Congress modify the Jones Act regulations regarding crew members and the percentage of a vessel’s crew that is required to carry U.S. citizenship. As it stands, the Jones Act requires all vessels shipping cargo between two locations in the U.S. to be built in the U.S., majority U.S.-owned, and to ensure that at least 75% of crew members are U.S. citizens.
But as the domestic oil industry continues to flourish, petroleum companies continue to call for Congress to modify the Jones Act. The Jones Act raises shipping costs for oil companies by a substantial amount. For example, the cost to build a tanker in the U.S. can run as much as four times over the cost to build the same ship in Asia. The cost of operating a U.S.-flagged ship with a predominantly U.S. crew is also about four times higher. Shipping crude oil from the Gulf Coast to ports around the U.S. can run about $5 or $6 per barrel, whereas the price to ship on a foreign-flagged vessel is only about $2 per barrel.
However, these higher prices allow for safer transportation of products, greater compliance with maritime law, and protections for the U.S. economy and its citizens. Other nations might not have the same strict safety regulations and training the U.S. has in place and operate more cheaply – using crew that are often overworked and underpaid, and who have been contracted to work pursuant to sham collective bargaining agreements and arbitration clauses which afford the crew no redress in U.S. courts. This is often why foreign-flagged ships are often appealing to oil companies. Without the stringent regulations of the Jones Act in place, the commercial maritime industry would revert to similar tactics as the cruise industry, for which nearly all cruise vessels fly foreign flags and maintain foreign arbitration clauses in their crew contracts.
In essence, the cruise industry effectively sidesteps the requirements of the Jones Act by flying foreign flags (which they are allowed to do because they sail from the U.S. to international ports of call) and depriving their crew of redress of their injuries and grievances in U.S. courts. If the oil and gas interests succeed in obtaining relief from the Jones Act, the same risks that we have addressed in the cruise industry are likely to spill over into the oil and gas shipping industries as well.
Hopefully Congress makes the right call when addressing the plights of oil companies and continues to offer protection for maritime workers, whose well-being and rights largely depend on the provisions of the Jones Act. Because as each Jones Act attorney at our firm well knows, the well-being and rights of maritime workers are far too often violated.
Published on September 5, 2014
Categories: Maritime Matter of the Week